Canadian Taxation

Why the CRA may ask some questions about your tax return

Published On November 5, 2013 | By Joseph (Ken) | Government, Personal tax

tax time

A new measure in the 2012 federal budget legislation (Bill C-38) required tax preparers (those that prepare more than 10 income tax returns annually) to efile (electronically file) all returns after 2012.

Although electronic filers do not send their receipts to the CRA, they are required to keep the receipts, and relevant documents that support their claims, for six years. 

As the CRA processes most of the tax returns filed within two to six weeks of filing, it screens the information provided on those returns using four main review programs.

The four main review programs:

1) Pre-assessment Review Program –  conducted before Notices of Assessment is issued for tax returns filed.  The returns chosen are ones that represent a higher risk of tax loss (ie larger than normal refunds, history of compliance problems, out of the ordinary deductions).

2) Processing Review Program – similar to the pre-assessment review program but conducted after Notice of Assessment is issued.  The returns chosen are ones that consist of deductions and credits that have a history of higher than usual errors (ie moving claims and equivalent to spouse claims).

3) Matching Program – this program ensures that information slips filed by a third party, such as institutions and employers, have been reported by the taxpayer correctly.  

IMPORTANT! It is very important that you include all information slips when filing your tax return.  Failure to include slips twice within a three year period can result in a 20% penalty on the GROSS amount of the slip. Arguably an excessive and overly punitive penalty, it is important that you avoid it. If you did miss a slip, it is better to file an amendment BEFORE it is identified by the CRA matching program.

4) RRSP Excess Contribution Review Program – this program ensures that individuals who have over-contributed to their RRSP’s have filed the required T1-OVP form.  The CRA does not assess the amount of the “tax” but informs the taxpayer that the situation exists and request the taxpayer file the required form.

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About The Author

Joseph (Ken)
(Ken) is a Registered Public Accountant with over 25 years of public practice experience in the accounting profession. Ken specializes in accounting information systems, taxation and financial reporting.

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